Opportunities abound for infrastructure investment in Africa— PWC Report

Project PixThe African continent continues to attract the interest of global investors, developers and operators searching for growth, PricewaterhouseCoopers (PwC) latest report has said.

While there are short term concerns in some of Africa’s regions, the opportunities abound for infrastructure investment and development. Infrastructure spend in the region is projected to reach $180 billion per annum by 2025, according to PwC’s ‘Capital Projects & infrastructure in East Africa, Southern Africa and West Africa,’ report issued early this month.

More than half of respondents indicated that their planned spending on infrastructure — both new projects and refurbishment of assets — would increase by more than 25 per cent from the previous year.

They said much of their spending would be focused on new development, with 51 per cent of all respondents planning to spend more than half of their budgets on new assets. Respondents from West Africa were especially bullish, with 58 per cent planning an increase of more than 25 per cent in spending, followed by those in East Africa (53 per cent) and Southern Africa (40 per cent).

Jonathan Cawood, Capital Projects & Infrastructure Leader for PwC Africa, said: “The shallow economic recovery in most developed markets has shifted the focus to faster-growing regions. This is also true for the infrastructure development sector.

“With an abundance of natural resources and recent mineral, oil and gas discoveries, demographic and political shifts and a more investor-friendly environment, the investor spotlight shines brightly on Africa.”

Interviews were conducted among 95 key players in the infrastructure sector, including development finance institutions, private financiers, government organisations and private construction and operations companies across East, West and Southern Africa. The sectors surveyed included water, transport and logistics, energy, mining, telecoms, and real estate, with the main focus being on economic infrastructure.

Highlighting the different stages of development and uniqueness of each country, the report provides insights into the world of infrastructure delivery across African countries and regions in sub-Saharan Africa (SSA). It showcases the drivers for success, the current thinking and challenges stakeholders are experiencing within the region.

“While respondents are clearly committed and optimistic about the continent’s infrastructure development, there are a number of obstacles they recognise must be dealt with. Resolving these quickly and creatively will not only positively affect their current projects, but more importantly, will attract other project developers, owners and investors to enter the African market,” said Mr. Cawood.

Despite its slow growth, South Africa remains the powerhouse of the SSA region with the most sophisticated infrastructure, state-owned entities, financial services, telecommunications, regulation and greater industrial and sector capacity.

Overall the top three challenges in delivering capital projects across Southern Africa are: the availability of skills (47 per cent), a lack of internal capacity among state organisations to plan, procure, manage and implement capital infrastructure projects (43 per cent), and the impact of political risk and government interference during project lifecycles (40 per cent).

“With a number of concessions having been cancelled by governments in the region, an improvement in transparency, regulation and procurement is needed to help restore the confidence of foreign investors in partnership models,” added Mr. Cawood. Access to funding was raised as a concern (33 per cent), as was policy and the inhibiting regulatory environment (27 per cent).

Many projects across SSA have been affected by the lack of funding or insufficient funding. Funding from sources such as sovereign wealth funds, bonds and pensions funds is becoming increasingly important, but these types of investors are typically more interested in projects that are fully operational and tend to shy away from greenfield projects and their construction risks.

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